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Huawei gets a breather, trade tensions are snaring everything from tech workers to vital rare-earth minerals, and the Fed’s chairman is starting to worry about rising levels of business debt. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.
Huawei Gets a Break from Blacklist
U.S. officials are granting temporary exceptions to an export blacklist against Huawei Technologies. The decision will give some suppliers and customers of China’s telecom giant a 90-day reprieve from tough trade penalties, John D. McKinnon, Dan Strumpf and Yoko Kubota report.
- The reprieve eases tensions between the U.S. and China as both countries seek to get trade talks back on track.
- The move could also help the U.S. as it seeks to persuade allies to ban Huawei gear from their networks by limiting immediate global disruptions.
- The exceptions show the blacklist order has “always been for leverage in the trade talks,” said Derek Scissors, an American Enterprise Institute scholar.
WHAT TO WATCH TODAY
U.S. existing-home sales for April are expected to rise to an annual pace of 5.35 million from 5.21 million a month earlier. (10 a.m. ET)
The Atlanta Fed’s Raphael Bostic speaks on the economy and monetary policy at 10:45 a.m. ET, the Chicago Fed’s Charles Evans speaks on the economy and monetary policy at 10:45 a.m. ET, and the Boston Fed’s Eric Rosengren speaks to the Economic Club of New York at noon ET.
Japan’s trade balance for April is out at 7:50 p.m. ET.
TOP STORIES
Talent War
The U.S. has slowed approvals for the nation’s semiconductor companies to hire Chinese nationals for advanced engineering jobs. The disruption, which started last year, has affected hundreds of jobs at companies including Intel, Qualcomm and Globalfoundries, impeding their ability to hire Chinese employees or move existing workers to projects in the U.S., Asa Fitch reports.
- Because companies are giving foreign workers knowledge about sensitive technology they could eventually take home, the Commerce Department considers such assignments the equivalent of an export.
- Approvals for so-called deemed-export licenses once took a matter of weeks, whereas a wait of six to eight months isn’t unusual today.
Get Ready
An American chemicals company and an Australian miner want to build the first rare-earth minerals separation plant in the U.S. in years. Their aim is to shore up supplies of important commodities caught up in the U.S.-China trade conflict, Rhiannon Hoyle reports.
- The proposal by Blue Line Corp. and Lynas Corp. shows how companies are reacting to the U.S.-China trade fight: a mix of concern and opportunism.
- Production of rare earths is dominated by China, but some of the world’s biggest consumers are U.S. manufacturers of advanced technology such as electric vehicles, wind turbines and military equipment.
- China put the minerals squarely in its sights. The U.S. ships ore from its only active mine to China for processing. Starting June 1, those shipments will be saddled with a 25% tariff.
Powell Warns on Business Debt
Federal Reserve Chairman Jerome Powell warned about potential risks from rising levels of business debt, Nick Timiraos reports. But the economy isn’t facing a rerun of the subprime mortgage crisis.
“As of now, business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm to households and businesses should conditions deteriorate. At the same time, the level of debt certainly could stress borrowers if the economy weakens,” Mr. Powell said Monday.
Why So Negative?
Negative interest rates have been a fixture in Europe for several years, and that’s unlikely to change anytime soon. While there have been some positive effects in terms of reducing borrowing costs, the policy—which is being deployed by central banks in the eurozone, Denmark, Switzerland and Sweden—hasn’t succeeded in boosting growth and inflation to the point that they’re not needed anymore, Brian Blackstone writes. As time goes on, the benefits wane and the risks mount. “Overall, we are on a painkiller,” said Tamaz Georgadze, chief executive of Raisin GmbH in Berlin, “and it’s very hard to get off it.”
Spending Spree
One side-effect of the ECB’s cheap money: a flurry of investment and deal making outside of Europe. French companies in particular have been snapping up foreign competitors, fleeing anemic growth and high taxes at home. French corporations spent around $100 billion on foreign acquisitions in each of the past two years, driving corporate indebtedness higher and drawing the eye of wary regulators, Patricia Kowsmann and Tom Fairless report.
What We’re Following
Ford Motor Co. is cutting 7,000 salaried employees, or about 10% of its white-collar workforce. The move is part of Chief Executive Jim Hackett’s broader plan to reverse profit declines and catch up to competitors in the fast-changing car business. The reductions will include 800 layoffs in North America, where Ford already has made about 1,500 voluntary buyouts, a company spokesman said.
Conflicts between the U.S. and its major trade partners have weakened business investment and curtailed trade around the world, threatening to hamper economic growth, the Organization for Economic Cooperation and Development said. In a quarterly report, the Paris-based research body lowered its 2019 global growth forecast to 3.2% from 3.3% previously. That would mark a slowdown from 3.5% in 2018 and 3.7% in 2017.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
It’s not OPEC. But Uber and Lyft drivers have formed a little grassroots cartel to boost their bargaining power. “Every night, several times a night, Uber and Lyft drivers at Reagan National Airport simultaneously turn off their rideshare apps for a minute or two to trick the app into thinking there are no drivers available—creating a price surge. When the fare goes high enough, the drivers turn their apps back on and lock into the higher fare,” Sam Sweeney writes on WJLA’s website.
Trade War, what is it good for? “Perhaps nothing captures the growing anti-U.S. sentiment in China better than a song about the trade war that is going viral in Beijing: ‘If the perpetrator wants to fight, we will beat him out of his wits.’ This privately-produced song has more than 100,000 views on WeChat and is just one of many signs of brewing anti-American sentiment on Chinese social media as trade talks falter,” Bloomberg News writes in Next China.
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from Real Time Economics https://on.wsj.com/2YFTGk8
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